5 Dec 2008

ECB cuts eurozone rates to 2.5%

12:12 pm on 5 December 2008

The European Central Bank has delivered a record rate cut, lowering the key interest rate for the 15 countries that use the euro to 2.5% from 3.25%.

The cost of borrowing was cut for a third consecutive month as the central bank tries to bolster the eurozone's faltering economies.

Central banks worldwide are cutting interest rates dramatically to stave off a protracted recession.

Earlier, the Bank of England reduced interest rates to 2% from 3%. The rate is now at its lowest level since 1951.

And Sweden's central bank cut its key interest rate by a record 1.75 percentage points to 2%.

The Danish central bank also cut its key interest rate by 0.75 percentage points to 4.25% on Thursday.

The cut was the most aggressive in the ECB's 10-year history. Official statistics have confirmed that the eurozone is in a recession and recent economic data has been grim.

ECB president Jean-Claude Trichet said the global economy was likely to remain weak next year, as was demand in eurozone countries. He said turmoil on financial markets could further weaken the eurozone economy.

Many European countries have unveiled stimulus plans to help boost growth.

Earlier, French President Nicolas Sarkozy detailed a 26 billion euro ($US33 billion) stimulus plan to enable France to fend off financial crisis.

Member states of the eurozone are: France, Italy, Germany, Belgium, the Irish Republic, the Netherlands, Luxembourg, Spain, Portugal, Slovenia, Malta, Greece, Austria, Finland and Cyprus.

Other cuts

The Reserve Bank of New Zealand cut the Official Cash Rate by an unprecedented 1.5 percentage points to 5% on Thursday.

The rate is now at its lowest level in five years and was previously 6.5%. It is now 3.25 percentage points lower than in July.

The Reserve Bank of Australia cut its rate to 4.25% on Tuesday to its lowest level in six and a half years. It was the fourth consecutive cut by the bank.

The Bank of Thailand has this week reduced its key lending rate by one percentage point to 2.75% - its biggest cut in eight years.